REPUBLIC OF THE PHILIPPINES DEPARTMENT OF FINANCE BUREAU OF INTERNAL REVENUE March 29, 2012 REVENUE MEMORANDUM ORDER NO. 13-2012Subject : Revised Guidelines and Procedures in Handling Letter Notices Generated Through Third-PartyInformation Data Matching with Tax ReturnsTo : All Internal Revenue Officers and Others Concerned______________________________________________________________________________I. OBJECTIVEThis Order is issued to simplify guidelines, procedures and minimize processing time in handling LetterNotices (LNs) generated through the following third-party information (TPI) data matching programs: Reconciliation of Listing for Enforcement System - Summary List of Sales and Purchases (RELIEF); Bureau of Customs Data Program (BOC); and Tax Reconciliation System (TRS).II. COVERAGEThis Order shall cover the income, value-added and/or percentage tax liabilities of individual andcorporate taxpayers who are issued LNs based on the RELIEF, BOC and TRS TPI data matchingprograms.III. POLICIES1. As provided for under existing Revenue Memorandum Orders (RMOs) on RELIEF (i.e., RMO No. 30-2003, as amended), BOC (i.e., RMO No. 34-2004, as amended) and TRS (i.e., RMO No. 28-2007, asamended), as further amended by RMO Nos. 7-2010, taxpayers with discrepancy on their income, salesand/or purchases (domestic or imported) shall be notified of such findings through the issuance of aLetter Notice (LN).2. RELIEF-BOC-TRS LN (Annex “A”), together with the Details of Taxpayer’sCustomers’/Suppliers’ Records (DTCSR) (Annex “B-1”) and/or Details of Importations with ReturnInformation Matching (DIRIM) (Annex “B-2”), and Details of Withholding Agents/Payors andPayees/Income Recipients’ Records (DWAPR) (Annex “B-3”), shall be generated based on theparameters determined and discrepancy threshold set by the Commissioner of Internal Revenue (CIR)and to be deployed via the LN portal facility.3. The LNs for any given taxable year shall be handled by the investigating office (Revenue DistrictOffice or Audit Division under the Large Taxpayers Service [LT Audit Division]) having jurisdiction overthe taxpayer.
4. If there is an on-going audit/investigation pursuant to an electronic Letter of Authority (eLA) prior toLN assignment, the Revenue Officer (RO) handling the eLA shall also be assigned the LN. The said LNshall not be considered closed but shall be consolidated with the eLA. The TPI reflected in the LN shallbe properly utilized and the extent of utilization shall be included in the report of investigation by theRO. The policy of non-closure of the eLA without the resolution of the LN shall be strictly enforced.5. If an eLA is terminated before an LN is issued, the investigating office shall request the tax docketfrom the Assessment Division (AD) or Administrative Division (AdminD), as the case may be, for non-large taxpayers and Records Division for large taxpayers and shall ascertain whether the discrepanciesreflected in the LN are in the report of investigation. If discrepancies are not included, the RO shallpursue action on the LN based on the procedures as prescribed herein. If the discrepancies areconsidered, the RO shall recommend cancellation of the LN and the tax docket shall contain the LN,photocopies of the Memorandum Audit Report, Working Papers showing reconciliation undertaken,BIR Form 0500 Series and other applicable documentary attachments.6. The deficiency income, value-added and/or percentage taxes shall be computed using the formulasprescribed in the Computation Sheet hereto attached (Annexes “C”, “C-1”, “C-2”, “C-3”, and “C-4”).7. Taxpayer shall be entitled to abatement of surcharge, interest and compromise penalty providedhe/she/it pays the basic deficiency tax(es) within thirty (30) days from receipt of the LN. The paymentof deficiency taxes shall be made using Payment Form (BIR Form No. 0611-A) (Annex “D”). Anypayment of tax liabilities beyond the thirty (30)-day period shall be assessed with the correspondingsurcharge (if applicable), interest and compromise penalty. In both cases, an “Agreement Form”(Annex ”E”) shall be executed by the taxpayer or his/her/its duly authorized representative/tax agentindicating therein the amount and date when the deficiency tax(es) shall be paid.8. Installment payment shall be allowed as settlement of the tax deficiencies arising from LN in casethe total tax liabilities exceed five hundred thousand pesos (P500,000.00) for non-large taxpayers orten million pesos (P10M) for large taxpayers. In this case, a written request for installment payment ofthe basic tax due plus increments using the Application for Installment Payment (Annex “F”) must beaccomplished. The corresponding interest on the basic tax due per installment shall be computed up tothe date of payment as shown in the application. The payment shall be made using Payment Form (BIRForm No. 0611-A). In case of default of any installment payment, the remaining balance of basic taxplus the increments shall become due and demandable immediately without prior notice to taxpayer.9. The Revenue District Officer (RDO)/Chief, LT Audit Division shall recommend to the Regional Director(RD)/Assistant Commissioner – LTS (ACIR-LTS) the issuance of an issue-based eLA under certainsituations as required under this Order.10. RMC No. 40-2003 provides that LN issued to taxpayers can be considered a notice of audit orinvestigation insofar as amendment of any return covering the period referred to in the LN.Accordingly, a taxpayer shall be disqualified from amending his/her/its return covering the periodreferred to in the LN upon issuance of the same. Furthermore, RMO No. 55-2010 circularizes the
decision of the Court of Tax Appeals in the case of Big AA Corporation v. Commissioner of InternalRevenue, C.T.A. Case No. 7093, February 22, 2006, which upheld the provisions of RMC No. 40-2003relative to the treatment of LN, as a “notice of audit or investigation” in the absence of evident error orclear abuse of discretion.”11. The settlement and payment of the deficiency tax(es) under an LN or issue-based eLA shall notpreclude the Bureau from issuing an eLA covering the comprehensive audit of a taxpayer’s taxliabilities, if warranted. However, any payment of deficiency tax(es) shall be credited against anyassessment that may be made by the investigating office pursuant to an eLA provided thediscrepancies disclosed by said audit are of the same nature as the discrepancies reflected in the LN.12. The AD and concerned Office of the Head Revenue Executive Assistant – Large Taxpayers Service(OHREA-LTS) for non-large and large taxpayers, respectively, shall evaluate, review and monitor theaction taken on the LN by the investigating offices. However, only those applicable functions shall beperformed by the concerned OHREA-LTS.13. The taxpayer who fails to settle his/her/its tax liabilities resulting from LN discrepancy shall beissued any or a combination of the following actions:a) Issuance of eLA under certain situations and/or Preliminary Assessment Notice (PAN)/FinalAssessment Notice (FAN) in accordance with the provisions of Revenue Regulations (RR) No. 12-99;b) Imposition of administrative sanction of suspension and temporary closure of businessestablishment in accordance with the provisions of RMO No. 3-2009 (Oplan Kandado) if the under-declaration is thirty percent (30%) or more may be recommended;c) Issuance and enforcement of the Subpoena Duces Tecum (SDT) in strict compliance with proceduresenunciated in RMO No. 88-2010 and other applicable pertinent revenue issuances. After compliancewith procedures on the issuance and enforcement of the SDT, docket shall be endorsed to the Office ofthe Regional Director (ORD)/Office of Assistant Commissioner – LTS (OACIR-LTS) through theAD/concerned OHREA-LTS for issuance of PAN/FAN in accordance with the provisions of RevenueMemorandum Circular (RMC) No. 23-2000.14. A Revalida Committee in the National Office shall be created to be headed by the CIR to conductpost review of the processes in the LN generation and its deployment, audit reports of investigation onLNs of erring ROs, and selected LN dockets acted upon (e.g., cancelled, closed, paid/assessed cases,etc.). A separate Revenue Special Order shall be issued for the purpose.15. For LN originally assigned (with eLAs [either the investigation is on-going or terminated] or withouteLAs issued) or assumed (referred to another RO), the RO assigned shall resolve the LN discrepancywithin thirty (30) days from receipt of original assignment/referral. The RD/ACIR-LTS shall direct theROs to act without delay on the resolution of the LN discrepancy. After the lapse of the thirty (30)-dayperiod and there is no resolution or action taken, except when RO performs other necessaryprocedures as herein required and/or recommends imposition of administrative sanction ofsuspension and temporary closure of business establishment under RMO No. 3-2009 or recommendsthe issuance and enforcement of SDT under RMO No.88-2010 and other applicable pertinent revenueissuances, the RDO/Chief, LT Audit Division shall submit the list of taxpayers/LNs and the names of the
ROs to the ORD/OACIR-LTS for transmittal to the Office of the Commissioner of Internal Revenue(OCIR). The CIR shall refer the lists of the taxpayers/LN to the Revalida Committee for appropriateaction and the names of the erring ROs to Inspection Service for the issuance of a Show-Cause Order.Appropriate sanctions against erring ROs shall be imposed, if warranted.16. Activities and accomplishments of the investigating offices relative to this Order shall be monitoredby the OCIR and the concerned offices, i.e., Office of Deputy Commissioner – Operations Group, AuditInformation Tax Exemption and Incentives Division (AITEID), etc., based on key performance indicator(KPI).